Caesarstone: Major Changes Ahead
By Emerson Schwartzkopf
MP MENASHE, Israel – Caesarstone Ltd. will close its original quartz-surfaces factory as part of a major revamp of the surfacing company.
Company CEO Yos Shiran announced the action today after reporting a net revenue loss of $3.8 million in this year’s first quarter.
“It is clear that Caesarstone has been lagging behind in its ability to generate profit and increase value for its shareholders,” Shiran said in a corporate statement. “We believe that swift actions, taken as part of a comprehensive restructuring plan, will allow us to leverage our strong brand and best-in-class products to address these issues.”
The company reported that worldwide revenue of $150.6 million in 1Q 2023 lagged behind the first three months of last year by 8.9% when adjusted for currency fluctuations.
First-quarter revenues for the United States, which accounts for half of Caesarstone’s worldwide total, dropped 10.8% to $76 million; Canada’s $18.4 million dropped 17.6% compared to 1Q 2022. The company’s only first-quarter, currency-adjusted revenue increases came from Europe (+10.7%) and Australia (+5.6%)
Shiran noted in the statement that the company is already taking steps to increase cash flow and will maintain an close eye on financials for the rest of the year.
“A major part of our effort has focused on improving our cash flow and we have already started to reap some benefits with positive cash flow from operations and an improved net cash position in the first quarter of 2023,” he said. “We will continue to take actions to make broad improvements throughout the entire business.”
One major step is closing the Sdot-Yam production facility – Caesarstone’s oldest – and its two production lines for quartz surfaces. The company cited several factors in closing the facility, including future expenses related to meeting new environmental-emissions standards in Israel.
The closing will include the layoff of 150 employees and cash costs of $4 million-$8 million in the next 12 months. Caesarstone will also need to deal with leases at the site that run through 2032.
Caesarstone will continue to operate its four production lines at its plant near Karmiel, Israel, and the two lines at its Richmond Hill, Ga., location.
“This difficult yet necessary step is expected to improve efficiencies, reduce costs and allow us to create a more-agile company as we streamline our production,” Shiran noted. “Our remaining facilities. combined with our network of third-party manufacturers, provide us with adequate capacity and the flexibility to efficiently serve our customers.”
In a conference call with Wall Street analysts today, Shiran noted Caesarstone is taking a close look at operations throughout the company to improve cash flow and performance.
He added that Caesarstone would work to reduce its product inventories, which reached a high of $238.2 million at the end of last year. The company reduced the stockpile by 11.4% to $211.1 million during first-quarter 2023.
Caesarstone also abandoned its outlook – or its future estimates – on full-year revenues or adjusted margin. Shiran noted several major variables in determining what’s ahead, including interest rates and a softening of the remodeling/renovation market in this year’s first quarter.
Three months earlier, the company declined to put a target number on revenues or margins, only offering an outlook that it “anticipates revenues for 2023 will be within range of 2022 revenues.” Last year’s worldwide revenues totaled $690.8 million.
“We are confident that our company can rise to its potential and we expect to deliver improved results in the years to come,” Shiran added. “We will continue to innovate, optimize our infrastructure, and enhance our competitive edge to improve our long-term growth and profitability.”
Caesarstone Ltd. stock trades on the NASDAQ under the symbol CSTE.
